Shinhan Financial’s U.S. Unit Ordered to Beef Up Money Laundering Oversight

Shinhan Bank America neither admitted nor denied any allegations of unsound banking practices or violations of the law, the order, which was issued with Shinhan Bank America’s consent, said. The FDIC issued a similar order demanding improvements in the bank’s internal controls in 2017. The agency said its 2021 report is confidential.

A representative for the bank said it wouldn’t be appropriate to comment on an ongoing case.

Shinhan Financial Group, the ultimate parent company of Shinhan Bank America, is one of South Korea’s leading financial conglomerates with the equivalent of $486 billion in assets in 2021, according to its most recent annual report. 

Shinhan Bank America operates 15 branches in the U.S., mostly in places with relatively large Korean populations, including New York, California, Texas and Georgia. 

The FDIC order requires Shinhan Bank America to retain a third party to review the management and staffing of its AML program, and directs the bank’s board to immediately increase its oversight of the program. Additionally, Shinhan was ordered to ensure it has accurately assessed its risks and to revise its internal controls.

The FDIC also ordered Shinhan Bank America to adopt an effective training program to educate its staff on AML policies and to validate its suspicious-activity monitoring system. The bank must review transactions from September 2020 onward for suspicious activity, and could be ordered to review transactions dating back to 2017.

Gu Seon Song, Shinhan Bank America’s former chief audit executive, sued the bank last year in New York for allegedly firing him after he refused to downplay the weaknesses in the bank’s AML program. 

Mr. Song in his lawsuit said the then-chief executive of Shinhan Bank America demanded that he alter an internal audit report’s conclusion that Shinhan Bank America had an unsatisfactory AML program. 

That report, which was produced following the FDIC’s 2017 order, attributed the alleged problems to inappropriate management oversight and a high turnover in the office supervising the program, Mr. Song said. 

Mr. Song said he later submitted the negative report to an FDIC examiner and was subsequently fired. He sued the bank under a U.S. law that protects bank staff from retaliation if they engage in whistleblowing. 

That lawsuit is still underway. Shinhan Bank America in a legal filing has denied Mr. Song’s allegations about giving instructions to Mr. Song to alter the audit report and that he was fired because he provided the report to the FDIC. 

A lawyer for Mr. Song didn’t respond to a request for comment.

Write to Richard Vanderford at [email protected]